Wanted to deep dive on a comment from @ZachHaver made here.
@ZachHaver curious on your thoughts on how you’d prefer to account for the “dynamic” changes when a service has a fixed price?
So in the oil change example, since different cars use different oils, oil capacities, filters, and even different times (I’m thinking about my experience with modern BMWs with no dipstick) - would you dynamically adjust to labor time to keep the accounting even? Or maybe the parts?
I think about it a lot and I have heard different takes, so just interested.
Well on some I would like the choice to lock a price on a canned job. so say I am running a syn. blend oil change a 5qt. of oil at 59.95. I would like to lock the finale price with that job. So if it took 4qt. it is still 59.95 without my advisor needing to change a lot or mess with pricing.
I feel the ability to add additional line items would be nice in the same grouping but would be ok like on a 6qt system in a different group to not change the price.
Me I would have a Syn. blend oil change, syn. oil change and a Euro oil change. with the protentional to add additional. on some of the services we may make more or less but keeping the price level vs. advisor needing to adjust stuff on the fly for different tickets.
Got it, good info on the front side of what we could sell to our customers. I like braking out the Euro idea. I’m also curious about the back end of reporting and accounting for you.
Let me know what you think about this (full transparency, I put a bunch of my notes into Gemini AI to help me shrink them down).
Accounting for a fixed-price service when your underlying costs are “moving targets” is a common headache for shop owners. If you simply list parts and labor at their normal rates, the total will almost never hit exactly $50.00.
To keep your reporting clean and your taxes accurate, here are the three most effective ways to structure this in your Shop Management System (SMS) or accounting software (like QuickBooks).
1. The “Labor as the Buffer” Method
(Seems to be the Most Common)
In this scenario, you treat your Parts as a fixed cost (priced at their actual retail value) and use Labor as the “plug” figure to bring the total down to $50.
How it works: You add the oil and filter to the ticket at their standard retail prices. You then manually adjust the labor line item so the grand total equals $50.
The Math: * Oil (5L): $35.00
Filter: $12.00
Labor: $3.00 (Adjusted from your usual $40 rate)
Total: $50.00
Pros: Keeps your parts inventory and margins accurate.
Cons: It makes your labor profit look abysmal on reports. It can also be tricky if your state charges sales tax on parts but not labor, as you might accidentally “shrink” the taxable portion too much.
2. The “Fixed Price Package” (The “Kit” Approach)
Most modern shop software allows you to create a Package SKU. This is a single “bucket” that has a fixed retail price of $50, but allows you to attach different parts to it internally.
How it works: You sell one item: “LOF-FIXED-50.” Inside that package, you “consume” the specific oil and filter used. The system recognizes the $50 revenue and subtracts the actual cost of those parts to give you a “Net Job Profit.”
Reporting: Your sales reports will show $50 revenue every time, but your Gross Profit (GP) % will fluctuate based on which car was on the lift.
Example:
Car A: $50 Revenue - $15 Cost = 70% Margin
Car B: $50 Revenue - $32 Cost = 36% Margin
3. The “Discount Line Item” (The Cleanest for Data)
If you want to see exactly how much money you are “giving away” to maintain this $50 offer, use a negative line item.
How it works: List the job at your Full Standard Price (e.g., $85.00). Then, add a line item called “Fixed Price Promo Adjustment” for -$35.00.
Why this is smart: 1. Customer Perception: The customer sees they got an $85 service for $50. 2. Tracking: At the end of the month, you can run a report on that specific “Adjustment” SKU to see exactly how much this marketing campaign cost you in “lost” revenue. 3. Sales Tax: This ensures you are still accounting for the full value of the parts for tax purposes (depending on your local regulations).
A Note on Sales Tax
Be careful with “Fixed Price” offers regarding sales tax. In many jurisdictions, you must show the price of the parts separately from labor because parts are taxable. If you “bundle” them into a flat $50, the state might require you to pay sales tax on the entire $50 instead of just the $20 worth of parts. Check with your CPA to see if you need to “break out” the components on the final receipt.
Which one do you think you’d like to see more from a reporting/accounting perspective?
I would say possibly a varying discount to parts and labor to lock in the final price would work. This would be seen as a loss leader but on stuff like a basic oil change the cost and amounts may very this would help advisors with the final price of service. also the when the labor grouping not included the shop supplies and tax so it reads correctly.
I hope I understand this right. To me unlocked hours means if it takes tech 1.25 hours to do a job but your billing oe book time then it shows tech labor but billed labor shows oe book time. This could be extremely helpful in tracking tech time as well as gp margins!